Is antibiotic-resistant bacteria a curse or a blessing for Big Pharma?

By Ben Levine for Kapitall.

At the end of April, the World Health Organization (WHO) for the first time ever released a report on the cresting global crisis of antibiotic resistance

Unsurprisingly, decades of willy-nilly antibiotic use for everything from organ transplants and breast implants to runny noses and splinters has given rise to antibiotic-resistant “superbugs.” And the problem isn't specific to hostpitals or humans:  80 percent of annual antibiotic use in the United States is on animals.

Naturally, the tone of the WHO’s report was particularly dire. As WHO Assistant Director-General for Health Security Dr. Keiji Fukuda put it, “Without urgent, coordinated action by many stakeholders, the world is headed for a post-antibiotic era, in which common infections and minor injuries which have been treatable for decades can once again kill.” The report mainly focuses on a few problem strains, ones responsible for bloodstream infections, diarrhea, pneumonia, urinary tract infections and gonorrhea. It also breaks down the most pressing antibiotic-resistance concerns geographically, listing E. coli and the bacteria responsible for pneumonia and Staph infections as the primary concerns in the Americas and Europe.

Unfortunately, most of the power and resources for the development of next-generation antibiotics is in the hands of major pharmaceutical companies, and, compared with long-term treatments, antibiotic development isn’t very profitable. Antibiotics are expensive and hard to develop, difficult to get approved by the FDA, and are generally only prescribed for relatively short periods of time. What’s more, the FDA has only approved four new antibiotics in the past 16 years. When earning potential is the only driver of biomedical innovation, new antibiotics don’t get developed.

Yet, gloom and doom aside, there may be a silver lining here. In 2010, the United States’ Biomedical Advanced Research and Development Authority (BARDA) created a program called Broad Spectrum Antimicrobials (BSA). The program engages in public-private partnerships, effectively funding big pharmaceutical companies to develop new antibiotics (because they wouldn’t do it otherwise), giving these companies marketing rights should they develop a product that gains FDA approval. The upshot is that if any of these companies are successful, they stand to make a substantial amount of money. So far, BARDA has created six of these partnerships, with GlaxoSmithKline ( GSK), Achaogen ( AKAO), Cempra ( CEMP), Basilea (OTC:BPMUF), Tetraphase ( TTPH) and Rempex, a subsidiary of The Medicines Company ( MDCO).

The EU followed suit in 2012, creating a program called the Innovative Medicines Initiative that operates in a similar way. The initiative has five pharmaceutical partners so far, two of which are our BSA friends Basilea and GlaxoSmithKline, and the others are Sanofi ( SNY), AstraZeneca ( AZN) and Janssen, a subsidiary of Johnson & Johnson ( JNJ). 

As of yet, there hasn’t been much news that an antibacterial superhero is around the corner, but that’s not to say there isn’t—with the lucrative possibilities of government-funded development, Big Pharma is likely keeping mum.

Do you think we can expect new, super effective antibiotics? Take a look at the list below, and let us know what you think in the comments.

Click on the interactive chart to view data over time. 

 

1. AstraZeneca PLC ( AZN, Earnings, Analysts, Financials): Develops, and commercializes prescription medicines for cardiovascular, gastrointestinal, infection, neuroscience, oncology, and respiratory and inflammation diseases worldwide. Market cap at $85.33B, most recent closing price at $68.05.

 

 

2. Cempra, Inc. ( CEMP, Earnings, Analysts, Financials): Focuses on developing antibiotics to meet critical medical needs in the treatment of bacterial infectious diseases in North America. Market cap at $455.28M, most recent closing price at $13.72.

 

 

3. GlaxoSmithKline plc ( GSK, Earnings, Analysts, Financials): Engages in the discovery, development, manufacture, and marketing of pharmaceutical products, over the counter (OTC) medicines, and health-related consumer products worldwide. Market cap at $133.74B, most recent closing price at $55.75.

 

 

4. Johnson & Johnson ( JNJ, Earnings, Analysts, Financials): Engages in the research and development, manufacture, and sale of various products in the health care field worldwide. Market cap at $261.67B, most recent closing price at $91.11.

 

 

5. Medicines Co. ( MDCO, Earnings, Analysts, Financials): Provides various medicines to hospitals for advancing the treatment of critical care patients primarily in the United States and Europe. Market cap at $1.84B, most recent closing price at $30.99.

 

 

6. Sanofi ( SNY, Earnings, Analysts, Financials): Engages in the discovery, development, and distribution of therapeutic solutions to improve the lives of everyone. Market cap at $135.68B, most recent closing price at $51.35.

 

 

7. Tetraphase Pharmaceuticals, Inc. ( TTPH, Earnings, Analysts, Financials): Develops various antibiotics for the treatment of serious and life-threatening multi-drug resistant infections. Market cap at $289.23M, most recent closing price at $13.99.

 

 

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

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